Basketball legend Yao Ming is the spokesman for the online education company iTutorGroup. Photo: Courtesy of iTutorGroup

Walking into a Shanghai subway station, one can see a billboard showing Chinese basketball superstar Yao Ming learning English through the domestic online education platform vipabc.com, a satisfied expression on his face.

At the Super Brand Mall in the city's Lujiazui financial district, friendly salespeople scour the crowds for potential clients to persuade to learn English through vipabc, a subsidiary of iTutorGroup, a leading English language learning institute.

"You can test your English level for free on our website before you decide to pay for classes," a salesperson told the Global Times reporter on Thursday, before going into the particulars about the classes.

The marketing blitz shows iTutorGroup's desire to expand. And with the recent funding it received a few months ago, it has the money to follow through.

Founded in 2004 with a headquarter in Shanghai and research and development headquarters in Silicon Valley in the US, iTutorGroup has educated students in 40 countries and regions and hosted more than 5 million classroom sessions, according to the company's website.  

It offers four products: vipabc, TutorABC, vipabc junior and TutorABCJr for English training, as well as TutorMing for Putonghua.

In November 2015, iTutorGroup announced it had received $200 million in funding from several institutional investors including Government Investment Corp of Singapore and Goldman Sachs Group. The amount was a record for China's online education industry.

Other domestic online education websites, such as hujiang.com, 51talk.com and koolearn.com, have also announced large-scale funding deals.

China's online education companies received $1.8 billion in total funding in 2015, sohu.com reported in January. The total financing amount was just 4.4 billion yuan ($670.56 million) in 2014.

"The rising amount of funding shows that investors are optimistic about the prospects of China's online education industry," Zhang Nan, vice president at Beijing-based online education company Limi Learning Corp, told the Global Times on Saturday.

Brimming with potential

With 72.28 million users, China's online education market was worth 119.17 billion yuan in 2015, industry Web portal chyxx.com reported on May 20.

The report projected that the number of users will grow to more than 200 million by 2022 - making the market worth 300 billion yuan.

"The online education market has so much potential because parents pay a lot of attention to their children's education and there continues to be a great need for the application of software in education," Zhang said.

That potential extends beyond China's first-tier cities. The market potential for online education is also high in the third- and fourth-tier cities, said Chen Liheng, general counsel at iTutorGroup.

He noted that nearly 25 percent of his company's users live in third- and fourth-tier cities.

And there is still room to grow in those areas. According to data from the Ministry of Industry and Information Technology, 98 percent of residents in China's administrative villages will have access to the Internet by the end of 2020, and they would become the potential customers for online education services.

"Online education liberates users from regional and time constraints, giving everybody, regardless of whether they live in the cities or the mountains, an equal opportunity to learn," Chen told the Global Times on Thursday.

In Chen's mind, there are few aspects of traditional education that can't be replicated online. The most notable one is the national college entrance examinations, which high school students must pass to go to university.

Zhang did not entirely agree with the view. "Online education is a really useful supplement to traditional classroom teaching, but it is still too early to say that it will take the latter's place."

Tech and talent

The growing market has been accompanied by growing competition, making many companies in the industry unprofitable due to their free business model, experts said.

Only 5 percent of 400 surveyed online education companies were profitable by the end of 2015, qianzhan.com reported on Wednesday. Ten percent broke even and 70 percent were operating at a loss. And 15 percent were dying.

Zhang noted that about half of today's online education companies will go out of business over the next year or two.

Most of the companies in the industry are offering more or less the same services, Chen said. If they want to survive, they have to specialize and build up their brands.

In Chen's view, technology is a crucial factor for an online education platform. Chen is inclined to define iTutorGroup as an Internet-based technology company, and its products as education-related products.

"We are a platform that connects consultants with students. It's like Uber for education."

The company has a technical team based in Silicon Valley that have designed an intelligent management system.

Chen believes iTutorGroup has an edge over its competitors because its advanced technology can ensure quality, and its large market share can attract a sufficient number of instructors and students. He also mentioned the company's reputation.

"These are the pillars of iTutorGroup's business model," he said.

"As long as we do well in those three things, revenue and profits will follow.

Zhang agreed. "Big data technology can monitor and analyze children's learning behavior in a way that allows a company to timely adjust teaching programs," he said.

Both Chen and Zhang said excellent teaching resources are crucial. Still, almost all of the consultants at Chen's company are part-timers. "But we have a series of carefully crafted exams to test what level they can work at and ensure they are quality teachers," Chen said.

"We're flexible about working hours and location and we offer a competitive salary, which helps our company retain talent," Zhang said.
Newspaper headline: Online education explodes in China